Buy-Local Can Inflate Local Dollars, Ignores Market Efficiencies, State Economist Says

Nov 27, 2016

The growth in online shopping on so-called Cyber Monday is expected to be 10 percent greater than a year ago according to the firm Adobe Digital Insights —  that’s actually flatter than the 17% year-over-year average since the National Retail Federation first used the moniker “Cyber Monday” in 2005. This has coincided with the rise of handcrafted, so-called “Arkansas made” gift items on websites like Etsy, Arkansas-hypen-made-dot-com, and the state government’s own “Arkansas e-store.”

Michael Pakko
Credit Arkansas Business

The buy-local movement is perhaps good for our souls and even our local culture says Michael Pakko, the state economic forecaster at the Institute of Economic Advancement at the University of Arkansas in Little Rock.

“If that is something that you value. If it it makes you feel good to buy local … then follow your instincts, follow your commands and do so, but it doesn’t really boost the economy overall.”

Setting out to buy only locally is, in a macroeconomic sense, a marketplace inefficiency.

“Suppose we imposed some rule that you had to buy local. Well, that’s kind of the equivalent of laying siege to a city. When you lay siege to a city, the idea is not to close them off so they can have a booming local economy, it’s to cut them off from the resources they need to survive and subsist.”

Further, overpaying for local products inflates the buying power of local dollars.

But Pakko also said that job growth is influenced quite a bit by new businesses, and such enterprises tend to begin with a single person peddling a product or service in her community.

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